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Richard
Richard, Tax Attorney
Category: Tax
Satisfied Customers: 54988
Experience:  29 years of experience as a tax, real estate, and business attorney.
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I received a cash property settlement in a divorce which had

Customer Question

I received a cash property settlement in a divorce which had stated interest. First off, is the interest taxable? Secondly, I had to enforce collection and the attorney took of 15% of the settlement. Can I offset the proceeds received with the 15%? Thanks for your help.
Submitted: 1 year ago.
Category: Tax
Expert:  Richard replied 1 year ago.
Hi! My name is ***** ***** I look forward to helping you!
Yes, the interest income would be taxed as ordinary income. With respect to the settlement, if the settlement is taxable to you, then you can deduct the attorney fees to collect the settlement. IRS Publication 17 (http://www.irs.gov/publications/p17/ch28.html) provides as follows:
"Legal Expenses
You can usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax.
You can also deduct legal expenses that are:
Related to either doing or keeping your job, such as those you paid to defend yourself against criminal charges arising out of your trade or business,
For tax advice related to a divorce, if the bill specifies how much is for tax advice and it is determined in a reasonable way, or
To collect taxable alimony."
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